Скачать или смотреть High Income Contractors This Deduction Still Works PTET Part II

The SALT deduction rules just changed — and if you’re a California contractor with an S-Corp or partnership, this update directly impacts how much federal tax you’re paying.
In this video, CPA George Ghazarian breaks down:
• The new $40,000 SALT deduction limit under the OBBBA
• How it compares to the California Pass-Through Entity Tax (PTET)
• When PTET still makes sense (and when it doesn’t)
• Real contractor examples with actual dollar savings
This is a must-watch if you’re paying more than $40,000 per year in California state taxes.
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What Changed With the SALT Deduction?
Under the 2017 Tax Cuts and Jobs Act, individuals could only deduct $10,000 of state and local taxes — no matter how much they actually paid.
The new OBBBA legislation increases that limit to:
• $40,000 for joint filers
• $20,000 for single filers
That’s a meaningful improvement — but many profitable California contractors still pay far more than $40,000 in state taxes each year.
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What PTET Does (And Why It Still Matters)
The California Pass-Through Entity Tax (PTET) allows S-Corps and partnerships to pay state income tax at the entity level.
Why that matters:
• Entity-level taxes are fully deductible for federal purposes
• There is no SALT cap at the business level
• The owner receives a dollar-for-dollar credit on their personal CA return
PTET effectively converts nondeductible personal taxes into a fully deductible business expense.
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PTET vs. the New $40,000 SALT Limit
Key takeaway:
The $40,000 SALT limit helps — but it does NOT replace PTET for most California contractors.
Examples discussed in the video:
• Contractors paying $60,000+ in CA tax still lose deductions without PTET
• At higher income levels, PTET can save $7,000–$28,000+ per year in federal taxes
• Lower-income years may justify skipping PTET
This is now a strategy decision, not a blanket rule.
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Real Contractor Case Study
An S-Corp construction company earning $850,000:
• CA tax: ~$79,000
• Without PTET: only $40,000 deductible
• With PTET: full $79,000 deductible
• Result: $13,650 in federal tax savings, even with the new SALT cap
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1. State Income Taxes
✔ Included
This is the biggest category for most people.
Includes:
• State income tax withheld from W-2 wages
• State income tax paid with quarterly estimates
• State income tax paid with your return
• Additional state tax paid after audit or notice
• Pass-through income tax paid personally (if not PTET)
👉 For CA contractors, this is usually the largest SALT item.
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2. Local / City / County Income Taxes
✔ Included (if applicable)
Examples:
• NYC local income tax
• Other municipal income taxes (not common in CA)
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3. Real Estate (Property) Taxes
✔ Included
Includes:
• Property taxes on your primary residence
• Property taxes on rental properties
• Property taxes on vacation homes
• Supplemental property tax bills
⚠️ Important distinction:
• Personal-use property taxes → SALT deduction (subject to cap)
• Rental / business property taxes → NOT SALT (fully deductible as a business expense, unlimited)
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4. Personal Property Taxes (If Based on Value)
✔ Included
Must be:
• Based on the value of the property
• Charged on a yearly basis
Examples:
• Vehicle registration fees based on value (the value-based portion only)

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California PTET Rules You Must Follow
PTET is powerful — but strict deadlines apply:
• June 15 payment is mandatory (miss it and PTET is gone for the year)
• Final payment due March 15 of the following year
• PTET is elected annually, not permanently
• Credit flows automatically to your personal CA return
Missing deadlines is the #1 mistake contractors make.
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When PTET Might Not Make Sense
PTET may not be ideal if:
• Your CA tax liability is below the SALT limit
• Your business has a loss
• Cash flow is tight
• You’re planning a sale or restructuring
For most profitable contractors, however, PTET is still a major win.
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CPA Recommendation for California Contractors
General guidance:
• CA tax over $40k: PTET is almost always worth it
• CA tax $20k–$40k: Run the numbers
• CA tax under $20k: PTET usually unnecessary
Most established contractors fall well above the $40k threshold.
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